The Government may be heading for another huge haul from corporation tax receipts in 2019, a possible election year.
The latest exchequer figures show the Government collecting another bounty in taxes paid by multinationals.
With a €2.7bn haul from corporation tax receipts in November alone, the Government took in €470m more than it expected last month from the booming profit taxes.
The haul from a single tax source “has echoes of the Tiger era”, said Alan McQuaid, chief economist at Cantor Fitzgerald Ireland.
Only last week, the budget watchdog, the Irish Fiscal Advisory Council, in its strongest rebuke yet, criticised Finance Minister Paschal Donohoe for allocating possible one-off corporation tax receipts to plug a €700m gross spending overrun in healthcare this year.
Days before his budget in early October, Mr Donohoe announced he would likely collect €1bn more from corporation tax receipts this year.
This was due to multinationals bringing forward payments of tax liabilities and paying more tax to the exchequer amid the global shake-up in the taxation driven by the Organisation for Economic Co-operation and Development.
The latest figures show that just over eight weeks after Mr Donohoe’s statement, the corporation tax bounty has already surpassed his €1bn figure. It is bringing in over €1.5bn more in the first 11 months than anticipated by his department.
Mr Donohoe has insisted his budget was prudent. “These additional receipts are not being used to finance additional expenditure,” he said in a statement following the release of the latest exchequer figures.
“Instead, all of the excess will be set aside to reduce — and possibly eliminate — the headline deficit, putting Ireland in a stronger position and better able to meet the challenges that may lie ahead.”
Mr McQuaid said that “clearly, we do not know what is going on” as it “appears that the dark arts are in play”.
For the exchequer, the flow of corporation tax receipts is a good thing, but it “has echoes of the Tiger era with no Plan B”, he added.
Davy chief economist Conall Mac Coille said the exchequer will easily bring in over €10bn in corporation tax revenues for the first time this year.
He said that in recent years multinationals had transferred intellectual property rights on their technology and the related profits into Ireland, meaning the exchequer is now tapping revenues that were once held offshore.
Corporation taxes have for a while been above trend but “that is not an argument for spending it”, said Mr Mac Coille, adding that “there could even be a larger haul next year”.
“The November returns suggest that the coffers are in good shape and would be a good backdrop for any election next year provided there is no crisis,” said Austin Hughes, chief economist at KBC Bank Ireland.
“These things can change. In other words, the Government should be cautious. It may well run a budget surplus but that doesn’t mean it is being fiscally prudent because of the unexpected corporation tax receipts.”
At €9.27bn, the exchequer’s tax receipts in November were over 7% above profile, mostly thanks to the corporation tax revenues.